Mulholland Drive + the Culture Industry

These two clips from David Lynch's 2001 Mulholland Drive are right along the same line as Adorno and Horkheimer's insight -

http://www.youtube.com/watch?v=R_VEQI2nS48



Club Silencio ~ Mulholland Dr. (2001) by seasonwitch

http://www.dailymotion.com/video/xg86qg_club-silencio-mulholland-dr-2001_news

Farewell/Sh*t Karl Marx Says

I just wanted to say that it has been an amazing semester with everyone. This class was one of my first real college classes and it was really nice to be able to discuss the interesting texts we read with such intelligent people.

Also, I seemed to get a lot of positive feedback on my presentation video so here's a link if anyone is wishes to see it again : http://www.youtube.com/watch?v=KoAEfXhbMWQ&feature=g-upl

I hope everyone enjoys the rest of their summer!

Article on Student Debt and Universities today II

http://nplusonemag.com/bad-education

MALCOLM HARRIS

Bad Education

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The Project On Student Debt estimates that the average college senior in 2009 graduated with $24,000 in outstanding loans. Last August, student loans surpassed credit cards as the nation’s single largest source of debt, edging ever closer to $1 trillion. Yet for all the moralizing about American consumer debt by both parties, no one dares call higher education a bad investment. The nearly axiomatic good of a university degree in American society has allowed a higher education bubble to expand to the point of bursting.

Since 1978, the price of tuition at US colleges has increased over 900 percent, 650 points above inflation. To put that number in perspective, housing prices, the bubble that nearly burst the US economy,  then the global one, increased only fifty points above the Consumer Price Index during those years. But while college applicants’ faith in the value of higher education has only increased, employers’ has declined. According to Richard Rothstein at The Economic Policy Institute, wages for college-educated workers outside of the inflated finance industry have stagnated or diminished. Unemployment has hit recent graduates especially hard, nearly doubling in the post-2007 recession. The result is that the most indebted generation in history is without the dependable jobs it needs to escape debt.

What kind of incentives motivate lenders to continue awarding six-figure sums to teenagers facing both the worst youth unemployment rate in decades and an increasingly competitive global workforce?

During the expansion of the housing bubble, lenders felt protected because they could repackage risky loans as mortgage-backed securities, which sold briskly to a pious market that believed housing prices could only increase. By combining slices of regionally diverse loans and theoretically spreading the risk of default, lenders were able to convince independent rating agencies that the resulting financial products were safe bets. They weren’t. But since this wouldn’t be America if you couldn’t monetize your children’s futures, the education sector still has its equivalent: the Student Loan Asset-Backed Security (or, as they’re known in the industry, SLABS).

SLABS were invented by then-semi-public Sallie Mae in the early ’90s, and their trading grew as part of the larger asset-backed security wave that peaked in 2007. In 1990, there were $75.6 million of these securities in circulation; at their apex, the total stood at $2.67 trillion. The number of SLABS traded on the market grew from $200,000  in 1991 to near $250 billion by the fourth quarter of 2010. But while trading in securities backed by credit cards, auto loans, and home equity is down 50 percent or more across the board, SLABS have not suffered the same sort of drop.SLABS are still considered safe investments—the kind financial advisors market to pension funds and the elderly.

With the secondary market in such good shape, primary lenders have been eager to help students with out-of-control costs. In addition to the knowledge that they can move these loans off their balance sheets quickly, they have had another reason not to worry: federal guarantees. Under the just-ended Federal Family Education Loan Program (FFELP), the US Treasury backed private loans to college students. This meant that even if the secondary market collapsed and there were an anomalous wave of defaults, the federal government had already built a lender bailout into the law. And if that weren’t enough, in May 2008 President Bush signed the Ensuring Continued Access to Student Loans Act, which authorized the Department of Education to purchase FFELP loans outright if secondary demand dipped. In 2010, as a cost-offset attached to health reform legislation, President Obama ended theFFELP, but not before it had grown to a $60 billion-a-year operation.

Even with the Treasury no longer acting as co-signer on private loans, the flow ofSLABS won’t end any time soon. What analysts at Barclays Capital wrote of the securities in 2006 still rings true: “For this sector, we expect sustainable growth in new issuance volume as the growth in education costs continues to outpace increases in family incomes, grants, and federal loans.” The loans and costs are caught in the kind of dangerous loop that occurs when lending becomes both profitable and seemingly risk-free: high and increasing college costs mean students need to take out more loans, more loans mean more securities lenders can package and sell, more selling means lenders can offer more loans with the capital they raise, which means colleges can continue to raise costs. The result is over $800 billion in outstanding student debt, over 30 percent of it securitized, and the federal government directly or indirectly on the hook for almost all of it.

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If this sounds familiar, it probably should, and the parallels with the pre-crisis housing market don’t end there. The most predatory and cynical subprime lending has its analogue in for-profit colleges. Inequalities in US primary and secondary education previously meant that a large slice of the working class never got a chance to take on the large debts associated with four-year degree programs. For-profits like The University of Phoenix or Kaplan are the market’s answer to this opportunity.

While the debt numbers for four-year programs look risky, for-profit two-year schools have apocalyptic figures: 96 percent of their students take on debt and within fifteen years 40 percent are in default. A Government Accountability Office sting operation in which agents posed as applicants found all fifteen approached institutions engaged in deceptive practices and four in straight-up fraud. For-profits were found to have paid their admissions officers on commission, falsely claimed accreditation, underrepresented costs, and encouraged applicants to lie on federal financial aid forms. Far from the bargain they portray themselves to be on daytime television, for-profit degree programs were found to be more expensive than the nonprofit alternatives nearly every time. These degrees are a tough sell, but for-profits sell tough. They spend an unseemly amount of money on advertising, a fact that probably hasn’t escaped the reader’s notice.

But despite the attention the for-profit sector has attracted (including congressional hearings), as in the housing crisis it’s hard to see where the bad apples stop and the barrel begins. For-profits have quickly tied themselves to traditional powers in education, politics, and media. Just a few examples: Richard C. Blum, University of California regent (and husband of California Sen. Dianne Feinstein), is also through his investment firm the majority stakeholder in two of the largest for-profit colleges. The Washington Post Co. owns Kaplan Higher Education, forcing the company’s flagship paper to print a steady stream of embarrassing parenthetical disclosures in articles on the subject of for-profits. Industry leader University of Phoenix has even developed an extensive partnership with GOOD magazine, sponsoring an education editor. Thanks to these connections, billions more in advertising, and nearly $9 million in combined lobbying and campaign contributions in 2010 alone, for-profits have become the fastest growing sector in American higher education.

If the comparative model is valid, then the lessons of the housing crash nag: What happens when the kids can’t pay? The federal government only uses data on students who default within the first two years of repayment, but its numbers have the default rate increasing every year since 2005. Analyst accounts have only 40 percent of the total outstanding debt in active repayment, the majority being either in deferment or default. Next year, the Department of Education will calculate default rates based on numbers three years after the beginning of repayment rather than two. The projected results are staggering: recorded defaults for the class of 2008 will nearly double, from 7 to 13.8 percent. With fewer and fewer students having the income necessary to pay back loans (except by taking on more consumer debt), a massive default looks closer to inevitable.

Unlike during the housing crisis, the government’s response to a national wave of defaults that could pop the higher-ed bubble is already written into law. In the event of foreclosure on a government-backed loan, the holder submits a request to what’s called a state guaranty agency, which then submits a claim to the feds. The federal disbursement rate is tied to the guaranty agency’s fiscal year default rate: for loans issued after October 1998, if the rate exceeds 5 percent, the disbursement drops to 85 percent of principal and interest accrued; if the rate exceeds 9 percent, the disbursement falls to 75 percent. But the guaranty agency rates are computed in such a way that they do not reflect the rate of default as students experience it; of all the guaranty agencies applying for federal reimbursement last year, none hit the 5 percent trigger rate.

With all of these protections in place, SLABS are a better investment than most housing-backed securities ever were. The advantage of a preemptive bailout is that it can make itself unnecessary: if investors know they’re insulated from risk, there’s less reason for them to get skittish if the securities dip, and a much lower chance of a speculative collapse. The worst-case scenario seems to involve the federal government paying for students to go to college, and aside from the enrichment of the parasitic private lenders and speculators, this might not look too bad if you believe in big government, free education, or even Keynesian fiscal stimulus. But until now, we have only examined one side of the exchange. When students agree to take out a loan, the fairness of the deal is premised on the value for the student of their borrowed dollars. If an 18-year-old takes out $200,000 in loans, he or she better be not only getting the full value, but investing it well too.

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Higher education seems an unlikely site for this kind of speculative bubble. While housing prices are based on what competing buyers are willing to pay, postsecondary education’s price is supposedly linked to its costs (with the exception of the for-profits). But the rapid growth in tuition is mystifying in value terms; no one could argue convincingly the quality of instruction or the market value of a degree has increased ten-fold in the past four decades (though this hasn’t stopped some from trying). So why would universities raise tuition so high so quickly? “Because they can” answers this question for home-sellers out to get the biggest return on their investments, or for-profits out to grab as much Pell Grant money as possible, but it seems an awfully cynical answer when it comes to nonprofit education.

First, where the money hasn’t gone: instruction. As Marc Bousquet, a leading researcher into the changing structures of higher education, wrote in How The University Works (2008):

If you’re enrolled in four college classes right now, you have a pretty good chance that one of the four will be taught by someone who has earned a doctorate and whose teaching, scholarship, and service to the profession has undergone the intensive peer scrutiny associated with the tenure system. In your other three classes, however, you are likely to be taught by someone who has started a degree but not finished it; was hired by a manager, not professional peers; may never publish in the field she is teaching; got into the pool of persons being considered for the job because she was willing to work for wages around the official poverty line (often under the delusion that she could ‘work her way into’ a tenurable position); and does not plan to be working at your institution three years from now.

This is not an improvement; fewer than forty years ago, when the explosive growth in tuition began, these proportions were reversed. Highly represented among the new precarious teachers are graduate students; with so much available debt, universities can force graduate student workers to scrape by on sub-minimum-wage, making them a great source of cheap instructional labor. Fewer tenure-track jobs mean that recent PhDs, overwhelmed with debt,  have no choice but to accept insecure adjunct positions with wages kept down by the new crop of graduate student-workers. Rather than producing a better-trained, more professional teaching corps, increased tuition and debt have enabled the opposite.

If overfed teachers aren’t the causes or beneficiaries of increased tuition (as they’ve been depicted of late), then perhaps it’s worth looking up the food chain. As faculty jobs have become increasingly contingent and precarious, administration has become anything but. Formerly, administrators were more or less teachers with added responsibilities; nowadays, they function more like standard corporate managers—and they’re paid like them too. Once a few entrepreneurial schools made this switch, market pressures compelled the rest to follow the high-revenue model, which leads directly to high salaries for in-demand administrators. Even at nonprofit schools, top-level administrators and financial managers pull down six- and seven-figure salaries, more on par with their industry counterparts than with their fellow faculty members. And while the proportion of tenure-track teaching faculty has dwindled, the number of managers has skyrocketed in both relative and absolute terms. If current trends continue, the Department of Education estimates that by 2014 there will be more administrators than instructors at American four-year nonprofit colleges. A bigger administration also consumes a larger portion of available funds, so it’s unsurprising that budget shares for instruction and student services have dipped over the past fifteen years.

When you hire corporate managers, you get managed like a corporation, and the race for tuition dollars and grants from government and private partnerships has become the driving objective of the contemporary university administration. The goal for large state universities and elite private colleges alike has ceased to be (if it ever was) building well-educated citizens; now they hardly even bother to prepare students to assume their places among the ruling class. Instead we have, in Bousquet’s words, “the entrepreneurial urges, vanity, and hobbyhorses of administrators: Digitize the curriculum! Build the best pool/golf course/stadium in the state! Bring more souls to God! Win the all-conference championship!” These expensive projects are all part of another cycle: corporate universities must be competitive in recruiting students who may become rich alumni, so they have to spend on attractive extras, which means they need more revenue, so they need more students paying higher tuition. For-profits aren’t the only ones consumed with selling product. And if a humanities program can’t demonstrate its economic utility to its institution (which can’t afford to haul “dead weight”) and students (who understand the need for marketable degrees), then it faces cuts, the neoliberal management technique par excellence. Students apparently have received the message loud and clear, as business has quickly become the nation’s most popular major.

When President Obama spoke in the State of the Union of the need to send more Americans to college, it was in the context of economic competition with China, phrased as if we ought to produce graduates like steel. As the near-ubiquitous unpaid internship for credit (in which students pay tuition in order to work for free) replaces class time, the bourgeois trade school supplants the academy. Parents understandably worried about their children make sure they never forget about the importance of an attractive résumé. It was easier for students to believe a college education was priceless when it wasn’t bought and sold from every angle.

If tuition has increased astronomically and the portion of money spent on instruction and student services has fallen, if the (at very least comparative) market value of a degree has dipped and most students can no longer afford to enjoy college as a period of intellectual adventure, then at least one more thing is clear: higher education, for-profit or not, has increasingly become a scam.

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We know the consequences of default for lenders, investors, and their backers at the Treasury, but what of the defaulters? Homeowners who found themselves with negative equity (owing more on their houses than the houses were worth) could always walk away. Students aren’t as lucky: graduates can’t ditch their degrees, even if they borrowed more money than their accredited labor power can command on the market. Americans overwhelmed with normal consumer debt (like credit card debt) have the option of bankruptcy, and although it’s an arduous and credit-score-killing process, not having ready access to thousands in pre-approved cash is not always such a bad thing.  But students don’t have that option either. Before 2005, students could use bankruptcy to escape education loans that weren’t provided directly by the federal government, but the facetiously named “Bankruptcy Abuse Prevention and Consumer Protection Act” extended non-dischargeability to all education loans, even credit cards used to pay school bills.

Today, student debt is an exceptionally punishing kind to have. Not only is it inescapable through bankruptcy, but student loans have no expiration date and collectors can garnish wages, social security payments, and even unemployment benefits. When a borrower defaults and the guaranty agency collects from the federal government, the agency gets a cut of whatever it’s able to recover from then on (even though they have already been compensated for the losses), giving agencies a financial incentive to dog former students to the grave.

When the housing bubble collapsed, the results (relatively good for most investors, bad for the government, worse for homeowners) were predictable but not foreordained. With the student-loan bubble, the resolution is much the same, and it’s decided in advance.

In addition to the billions colleges have spent on advertising, sports programs, campus aesthetics, and marketable luxuries, they’ve benefited from a public discourse that depicts higher education as an unmitigated social good. Since the Baby Boomers gave birth, the college degree has seemed a panacea for social ills, a metaphor for a special kind of deserved success. We still tell fairy tales about escapes from the ghetto to the classroom or the short path from graduation to lifelong satisfaction, not to mention America’s collective college success story: The G.I. Bill. But these narratives are not inspiring true-life models, they’re advertising copy, and they come complete with loan forms.

Image: Plans for a new athletic center at Ithaca College. From msidesign.com.

Article on Student Debt and Universities today I

http://www.villagevoice.com/2012-08-01/news/for-profit-colleges-con/

For-Profit Colleges Only a Con Man Could Love

Barbarians in the Ivory Tower

By Chris Parker

published: August 01, 2012

• Courtesy Barmak Nassirian

  

  Barmak Nassirian, former official with the American Association of Collegiate Registrars and Admissions Officers: “Overadvertise, oversell, overcharge, and underdeliver. They found a system where the pitch goes to one guy and the bill to someone else.”

• Courtesy Chris Pantzke

  

  Iraq-war veteran Chris Pantzke ran up $26,000 in debt and burned through an additional $65,000 of his GI Bill benefits with almost nothing to show for it at the Art Institute of Pittsburgh.

• Courtesy Suzanne Lawrence

  

  According to Suzanne Lawrence, who worked as a recruiter at Argosy University’s online division, the pressure to recruit students prompted illicit shenanigans, including falsifying documents.

Bobby Ruffin Jr. was only 14 when a recruiter from Ashford University called. The Birmingham, Michigan, boy thought he'd clicked on a link promising help finding money for college. It was actually just a lead generator for the for-profit, online school's sales staff.

At the time, Bobby was an A student. Hoping that homeschooling would deliver something better for their son, his parents had pulled him from the troubled Detroit schools. He told the recruiter that he wanted to be a doctor. She assured him that Ashford could be a stepping-stone to that dream.

Never mind that he was only in the eighth grade. "She said, 'You'll be working toward a degree as a medical doctor, so when you do graduate high school, you're almost there,'" Bobby says today. "I'm like: 'This is great. I'm going to talk to my mom.' And she's like: 'No, I wouldn't tell your parents because that would take away from the shock when it happens. If I were you, I'd complete the program, and when graduation comes around, let them know. Mom and Dad will be super excited.'"

Admission to Ashford requires a high school diploma or equivalency. So when it came time to fill out the financial-aid forms, the recruiter told Bobby to claim that he'd already graduated. He objected, but she insisted "the loan-processing company will go back and correct everything." Still, he left the graduation date blank. Someone filled it in, because Ashford was soon receiving federal-student-loan money on his behalf.

Of course, it's illegal for kids Bobby's age to receive financial aid. But for-profit colleges haven't always been scrupulous when it comes to raiding the federal treasury. Between student-aid and GI Bill programs, most schools receive 90 percent of their revenue from the American taxpayer. And the recruiters—often little more than salesmen paid largely by how many people they enroll—are driven mercilessly to keep those cash registers ringing.

Students don't get much in return. Although tuition rates can run as high as those at America's most esteemed universities, the education is generally substandard. In the end, most kids wind up walking away with a questionable degree bought at top dollar—and a mountain of debt to accompany it.

Bobby took online classes for almost a year. But when he wouldn't endorse Ashford's lying on his financial-aid forms, administrators miraculously discovered that he was under 18. Since this left him ineligible for federal aid, Ashford was forced to return his loan money to the feds.

The school wouldn't be eating those costs. Bobby would. Ashford, which declined interview requests for this story, sent him a bill for $13,000.

Last fall, Bobby was finally able to enroll at a real university, Eastern Michigan, where he was named a national collegiate scholar. Yet he still owes Ashford. Because that's a private debt, he isn't eligible for deferments while he's in school, and any future wages could be garnished.

Unfortunately, this isn't a scam that only targets the young and naive. The for-profit industry is so rife with deceit, it has been billed as the second coming of the mortgage-loan debacle. And the same people are behind it. Three-quarters of all for-profit students are enrolled at schools owned by Wall Street banks and private-equity firms.

All told, they soak $30 billion a year from American taxpayers. But even in the age of slash-and-burn government, Congress has shown no interest in stopping it.

"The problem with the subprime [housing] scam was that it got so big, it almost brought down the entire world's economy," says Barmak Nassirian, a former official with the American Association of Collegiate Registrars and Admissions Officers. "This one's wisely limited to $30 billion a year, which is highly sustainable. In the context of a multitrillion federal budget, that's not even a rounding error."

Consumer Fraud As a Business Model

You might not know it, but you're sitting on $117,000. That's basically how much every American is potentially worth in government student aid. Want to attend grad school? Throw in another $114,000.

And as for-profit colleges have discovered, an 18-year-old with 100 large makes for a very easy mark.

In order to get in on the gravy train, a school only needs accreditation from some supposedly neutral body. But Congress neglected to say who should do that accrediting, resulting in a system loaded with charlatans. Some agencies have built sturdy reputations over decades. Others are little more than rubber-stamp factories, more geared toward gobbling up members' dues than safeguarding kids.

"It never occurred to [Congress] that as billions of dollars get attached to the recognition process, the process would get corrupted," Nassirian says. "When you say yes, you gain membership dues. After all, you're living off these dues."

Yet even bargain-bin accreditation takes several years. So the titans of Wall Street found a way around this by purchasing small, failing schools to snatch up preowned accreditation.

Take Bridgepoint Education. Its majority stockholder is Warburg Pincus, a New York private-equity firm. When it needed accreditation for Ashford University, it bought the 87-year-old Franciscan University of the Prairies, a struggling, 300-student religious college in Clinton, Iowa. Overnight, it was transformed into the online powerhouse Ashford.

Bridgepoint, which also owns the University of the Rockies, grew from just 12,623 students in 2007 to 77,892 in 2010. Its profits also exploded, going from just $4 million to more than $216 million annually. About 85 percent of its revenue comes directly from the federal treasury.

But if Bridgeport and Warburg Pincus are billing top dollar, they're unrepentant misers when it comes to educating kids. In 2009, Bridgepoint spent less than $700 per student on actual instruction. By comparison, the nearby University of Iowa spends 17 times that figure.

What Bridgeport doesn't short is its marketing, spending $2,714 per student to keep the turnstiles spinning. Overall, the 15 largest for-profit colleges spend nearly $13 billion a year on recruiting and marketing.

Needless to say, it's a terrific business if you don't have to worry about educating kids. Nearly 80 percent of students won't complete their program within six years—almost double the failure rate at traditional schools.

The tactics have become so brazen that even accreditors are taking notice. Last month, Ashford conceded that the Western Association of Schools & Colleges had denied its accreditation renewal, noting that the school had just 50 full-time faculty members to teach 90,000 online students. Within a week, Bridgepoint's stock price had plunged 50 percent.

"It's basically consumer fraud rendered to a business model," Nassirian says. "Overadvertise, oversell, overcharge, and underdeliver. They found a system where the pitch goes to one guy and the bill to someone else."

We’ve Got Your Money. Now Beat It.

Earning a master's in psychology from the College of William & Mary in Virginia, Mary had been a good student all her life. When the military transferred her husband to Tampa, she chose Argosy University, the only area school offering a psychology doctorate geared toward clinicians rather than researchers.

Mary, who doesn't want her real named disclosed, figured it was legit. Argosy was accredited by the American Psychological Association. She aced her studies with a 3.7 GPA. All she needed was an internship to graduate. That's where her problems began.

Argosy University, with 19 campuses, is owned by Education Management Corporation (EDMC), whose investors include Goldman Sachs and Providence Equity Partners, a Rhode Island private-equity firm. To wring out more profit, Argosy began taking on more students than it could handle, says Mary's lawyer, Florida state representative Rick Kriseman.

But Argosy didn't have the professional connections to supply enough internships. So like air-traffic controllers, it decided to place students into holding patterns.

Mary was asked to accept a practicum instead. It's like a lesser form of internship that wouldn't bring her any closer to her doctorate.

She was upset but went along and spent the next eight months volunteering at a mental-health facility. But by the time she was finished, Argosy still didn't have enough internships. Her instructors ordered her to take a second practicum.

She didn't have much choice. Mary had already invested four years and more than $100,000. She spent another five months volunteering. By then, her instructors had begun to question her intellectual rigor.

They not only flunked her out of the program, but also refused to let her defend her work before a board of teachers and peers, then denied her a chance to address administrators before they rejected her appeal. (EDMC refused repeated requests for comment.)

Mary was shocked. "I was an A student," she says. "It was baffling to me how this could happen at the last minute. You have to understand the shame of going to school and being an A student and becoming a flunked-out person. It's so foreign and confusing."

Yet Kriseman would discover a pattern at play when he found three more students who'd suffered a fate similar to Mary's. "When the school did not have those [internship] slots, they found reasons to either dismiss the students or to make it so uncomfortable for them that they left on their own accord," he says.

Argosy's problems seemed to be nationwide. Across the country, in the psychology program at Argosy Seattle, the school had assured its doctoral candidates that accreditation was moments away—because without certification, their degrees would be all but worthless. It wouldn't be till later that administrators confessed that their application had failed—and they were closing the entire program.

Failure At a Luxury Price

For-profit colleges like to place their alarming failure rates in charitable terms. They claim to disproportionately serve low-income students who struggle in school.

But if they're serving people of lesser means, why are they charging so much money?

On average, a four-year degree from a for-profit runs twice what in-state tuition costs at a public school. When it comes to two-year programs, the disparity widens: For-profits charge three to four times the rates of their public counterparts. Yet they've still managed to lull the political class into believing their competition is driving down tuition.

During the Republican primary, Mitt Romney praised a major donor and co-chairman of his Florida fundraising team—Bill Heavener, owner of Full Sail University—for helping to "hold down the cost of education." What Romney failed to mention is that a 21-month degree in video-game art at Full Sail costs more than $80,000. And that's not unusual.

A four-year bachelor's degree in business from Indiana-based ITT Tech costs almost $89,000. That's more than twice the in-state tuition at the more venerated Indiana University.

Worse, subprime degrees from places like ITT and Full Sail are typically held in such low regard that it's difficult for grads to find jobs that pay enough to cover their loans. Nearly one in four for-profit students default on their loans within three years of leaving school, more than double the rate of public-school students.

But there's nothing like advertising to paper over your shortcomings. So for-profits carpet bomb the airwaves to make earning a degree seem as easy as downloading an app. Who hasn't seen those late-night TV ads for "college in your PJ's," or the Education Connection commercial featuring that rapping, dancing waitress? These ads drive viewers to websites that generate leads for schools' sales staffs, prompting an unending stream of solicitations. And when those leads are exhausted, schools buy lists from companies like QuinStreet, which made its name providing leads to subprime-mortgage brokers.

Last month, QuinStreet reached a settlement with attorneys general from 20 states, who'd accused it of fraud for operating gibill.com. The website was made to look as if it were run by the government to help veterans but was actually just a lead generator for for-profit colleges.

"The thing that made those lists valuable was the foreknowledge that these were people in dire straits, who were in over their heads and financially desperate, and therefore much more susceptible to a pitch out of the blue," Nassirian says.

The idea is to prey on people's hopes and desires, offering that yellow brick road to the American dream: an education and a better job. Workers are trained to identify emotional weaknesses and exploit them. That's undoubtedly what made Suzanne Lawrence an attractive hire at EDMC. She had a master's in psychology when she went to work for Argosy's online division in Pittsburgh.

"It was really funny because they used a lot of the same skills I was trained to use in grad school as therapeutic skills—like empathy and reflective listening—on the sales floor," Lawrence says. "It was evil and slimy. Your big job was to create trust, make them think you were their friend. The main goal in your first conversation was to find something they called 'the confirmed need,' which was the hot button you were going to push if that person tried to back out on you. Like, 'My dad wasn't really proud of me,' and that's what you write down. You keep that on your file, so when you call them, and they say 'I don't want to go,' you say: 'What about your dad? Don't you care about what he thinks anymore?'"

Lawrence worked with more than 2,000 others in a sea of cubicles and an auto dialer making 500 calls a day. The leads were generally so stale most calls were no-answers, hang-ups, or people screaming, "Stop fucking calling me!" Dry-erase scoreboards kept track of everyone's application numbers, horse-race style. Those who sold were loved. Those who didn't were berated, cajoled, and threatened, Lawrence says. Managers monitored calls and circled the cubicle bays encouraging workers to "always be closing."

The harsh, boiler-room atmosphere prompted her to make references to Glengarry Glen Ross. No one got it. They were too preoccupied with keeping their jobs.

The pressure prompted all sorts of illicit shenanigans, including falsifying documents, Lawrence says. Salespeople were coached to evade questions about cost and repeat the lie that "99 percent of our students don't pay anything out of pocket to go to school."

She was even instructed to sell online courses to people who didn't own computers. "Tell them to go to the library," her managers would say.

Military Disservice

Iraq-war veteran Chris Pantzke was discharged from the Army in 2006 after his convoy was hit by an IED. He suffered from a traumatic brain injury, along with post-traumatic stress disorder. The injuries left the former sergeant moody and anxious in closed spaces. Being in a classroom was out of the question.

But a saleswoman for the Art Institute of Pittsburgh, also owned by EDMC, convinced him that her school's online photography program was perfect for his situation.

He immediately struggled, getting migraines from staring at his computer. "There would be several days I'd get up at roughly 8 a.m. and wouldn't go to bed until 4 a.m.," Pantzke says. "That's how bad it was, because I was falling so far behind." He punched a hole in the wall next to his laptop and "dishes took flight."

In one online class, the teacher didn't have Internet access for more than a third of the course. Only after pestering three different advisers was he finally put in touch with the school's disability-services office. But despite the recruiters' original promise of specialized help, the Art Institute balked at his request for additional tutoring.

Then Pantzke appeared on PBS's Frontline for a story about for-profit colleges. Shortly before the Frontline piece aired, a vice president contacted Pantzke and asked him to sign a release saying "that I was doing fine and things were going great."

He refused but soon noticed a miraculous lift in his academic fortunes. Despite turning in one slapdash assignment he knew wasn't any good, he received an A. "Once I started making waves, I started passing my classes with A's and B's," he says. "I don't know if my grades were true, and it made me doubt my photography ability."

His tenure at the Art Institute came to an end on Easter when he was hurt in a serious car accident. Unable to type for six months, Pantzke decided he'd instead study photography on his own. In just 18 months at the Art Institute, he'd run up $26,000 in debt and burned through an additional $65,000 of his GI Bill benefits—with almost nothing to show for it.

Yet if Pantzke got away, there were plenty of other servicemen where he came from. A story by Bloomberg News caught a recruiter from Ashford University visiting a wounded-warrior barracks at Camp Lejeune in North Carolina. It seems that injured veterans—notably those with head injuries—are particularly receptive to the for-profit sales pitch. The story's opening line said it all: "U.S. Marine corporal James Long knows he's enrolled at Ashford University. He just can't remember what course he's taking."

Federal data shows that for-profits are increasingly targeting veterans. In 2009, they took in almost as much military money as public colleges—though they were educating just one-third of veteran students. Last year, eight of the top 10 educational institutions collecting GI Bill benefits were for-profit, taking in a stunning $626 million.

"I think sometimes the emphasis is on signing up the student as opposed to whether or not the student is really ready to be successful at that school," says Holly Petraeus, an official with the Consumer Financial Protection Bureau and wife of General David Petraeus. "The top 10 recipients of GI Bill aid, eight are for-profit schools, and they are very heavily engaged in marketing to the military—quite successfully, frankly."

It’s All About the Benjamins

The University of Phoenix will never be confused with Yale. According to one 2010 report, 90 percent of its students fail to graduate within six years.

Still, by pure monetary standards, former CEO Todd S. Nelson was a success. During his tenure, he tripled revenue for the school's parent company, the Apollo Group. Enrollment surged to more than 300,000.

Unfortunately, he accomplished this the old-fashioned way—by cheating. Since 1992, it has been illegal to pay recruiters based on how many students they bring through the door. Phoenix did it anyway until two recruiters blew the whistle, initiating a suit that would ultimately cost the school $88.3 million in settlements and fines.

Under pressure, Nelson was forced out in 2006, walking away with a generous $18 million severance. Founder John Sperling put a polite spin on the exit and said only that Nelson was "preoccupied" with the stock price to the detriment of the school's long-term health.

Yet if Nelson's profit motives were too lusty for Phoenix, they were a match made in corporate heaven for Goldman Sachs. The Wall Street bank had partnered with two private-equity firms to buy EDMC. Nelson was hired as the company's new CEO. Former Maine governor John McKernan Jr.—the husband of U.S. senator Olympia Snowe—was named chairman of the board. Over the next five years, the company's revenue would nearly triple, to $2.8 billion.

Last year, Nelson took home $13.1 million in salary and stock. By the standards of for-profit executive pay, he was working on the cheap.

Gregory Cappelli, his replacement at the University of Phoenix, received $25 million last year. CEO Robert Silberman of Strayer Education raked in an astounding $41.9 million in 2009. Yet even this pales next to Jonathan Grayer, the former CEO of Kaplan University, who walked away with a $76 million severance package, courtesy of Kaplan's parent company, The Washington Post.

By comparison, Harvard president Drew Faust collected a meager $875,331 in 2010.

Nelson's bad-boy practices have predictably caught up with him. Last year, the Justice Department and attorneys general from five states charged EDMC with fraud for paying recruiters based on the money they generated. Six more states have joined the suit.

EDMC claims its sales pay is not just based on bodies enrolled, but such things as business ethics, professionalism, and job knowledge. Kathleen Bittel would beg to differ. She was an EDMC recruiter when Nelson arrived and will readily attest to the change in atmosphere.

Over the next three years, the sales staff increased from 950 people to more than 2,600. "Once Goldman Sachs took over and they brought in [Nelson], everything changed," she says. "Everything became much more cutthroat. It was just more oppressive and very high pressure. . . . They were watching you constantly. We used to joke it was like being on the cotton plantation, and they were the overlords coming by on their horses. The only thing they were missing were the whips—but they had the whips verbally."

Like Lawrence, Bittel had studied psychology and proved adept at forging bonds. She'd gone back to school in her forties to support her family of four after her husband got cancer. She understood the difficulties of raising kids, working full-time, and going to college. She admits to "drinking the Kool-Aid" at first, believing Argosy's online program could help people like her.

But after six months on the job, she was allowed to take Argosy courses for free. That's when she discovered she'd aided a bait and switch. Many of the features she heralded to students were barely functional or didn't exist. The Worldwide Professionals Network, where students could find graduate mentors in their field, was nothing more than a bulletin board.

Worse, the classes themselves had less content than a political soundbite. "When I saw what they were passing off as college, I was appalled and mortified," Bittel says. "I'm a fabulous salesman if I believe in my product. But I was blown out of the water. I couldn't sell it anymore."

On the sales floor, she would soon go from golden child to problem student. Managers threatened to fire her. She protested that she'd excelled at EDMC's other barometers, like leadership, calls made, and conversations engaged. None of that mattered, they told her.

"Those are just put in there because the law says we're not allowed to pay you directly," she recalls her boss saying.

Bittel wasn't the only worker feeling the pressure. A man she carpooled with would cry on the way home.

"If you weren't unscrupulous, you struggled," she says. "Half the people I worked with, their previous job was in the mortgage industry. They targeted people in that industry. . . . They were the ones that did the best because they were so unscrupulous."

She eventually transferred to EDMC's career-placement department, where the same deceit wore a different outfit.

She was supposed to help Art Institute grads find jobs. But the school was churning out students with abysmal portfolios—if they had one at all.

She was also supposed to generate stats on how many of them found employment in their fields. The numbers were used not only to sell future students, but also by accreditors in maintaining a program's standing. So EDMC, she says, was prepared to rig these stats by any means necessary.

Bittel's boss liked to say that "every student is placeable. It's all a matter of technique." This "technique," she says, involved persuading people to sign affidavits saying they were employed in their field. She witnessed cases where someone with a degree in video-game design was counted as working in his field because he sold video games at Toys "R" Us.

Once, Bittel saw a co-worker lying on a form about a graduate's salary. The same employee showed her how to doctor e-mails so that students' replies favored the Art Institute. Both times she reported the scams to her boss. But instead of being fired, the co-worker soon received EDMC's North Star Award for exceptional performance.

EDMC is hardly alone in its transgressions. Two years ago, the feds conducted a sting on for-profit colleges, with investigators masquerading as prospective students. They tested the sales practices of 15 schools. Four encouraged outright fraud. They were all found to be deceptive.

Congress Sees No Evil

In the age of austerity, you'd think Congress would be anxious to root out waste, especially after allowing mortgage fraud to decimate the economy. But money talks loud enough to make any congressman hard of hearing. So despite a 20-year history of fraud and failure, for-profit colleges appear as bulletproof as ever.

Washington has been aware of the racket since U.S. Senator Sam Nunn (D-Georgia) held high-profile hearings in 1992, demonstrating how for-profits were recruiting students from welfare offices, housing projects, and homeless shelters. They were subsequently barred from paying salespeople based on enrollment.

It would take just a decade for Washington to eviscerate these protections. In 2002, President George W. Bush created a series of loopholes and announced that violators would no longer be punished.

Then Bush and Congressman John Boehner (R-Ohio) opened the door even wider in working to repeal a rule that required schools to educate at least 50 percent of their students on campus. It gave birth to an online gold rush, with for-profits flooding the Internet. Last year, 6 million students enrolled.

The industry had discovered the value of paying protection money to Congress. It spent $16 million on lobbying last year alone, buying a dream team of former officials that includes former House Majority Leader Dick Gephardt (D-Missouri) and no less than 14 former congressmen.

"I didn't know when I got into the issue of for-profit schools that it was the best way for me to have a reunion with every member of Congress as they parade through the door, all representing these schools," says U.S. Senator Dick Durbin (D-Illinois), who has held hearings investigating for-profits. "There is so much money on the table they can afford to hire everybody."

Needless to say, Durbin hasn't gotten far with his probe. He has found some support among fellow Democrats, but not a single Republican bothered to attend his hearings.

"I don't want to hear their sermons from the mount about wasting federal money when they won't even take a look at these obscenely subsidized for-profit schools," he says. "If they were talking about food stamps, they would cut people off in a second for this level of fraud. This is a wasteful expenditure of hard-earned consumer dollars to some of the wealthiest people in America, and that has to come to an end."

Congress's shrillest voices on waste refuse to even look at the industry. Despite sitting on the Senate committee examining for-profit fraud, Rand Paul (R-Kentucky) has expressed no curiosity about this money pit. Nor have fellow committee members Lamar Alexander (R-Tennessee) or deficit hawk John McCain (R-Arizona). Not one responded to repeated interview requests for this story.

President Obama has stepped into the breach, though with customary timidity. In July, the Department of Education made it once again unequivocally illegal to base salespeople's pay on enrollment. But other reforms were so watered down they were meaningless. Taxpayers should probably be thankful Obama did anything at all. At hearings last year, Senator Tom Harkin (D-Iowa) called it the most intense lobbying campaign he'd seen in his 32 years in Washington.

To truly appreciate how weak the final regulations were, consider this: The day they were revealed, for-profit stocks soared. The stock prices of EDMC and ITT Tech increased by 20 percent. In one day.

The government ignores the problem at the country's peril. Total student-loan debt, now more than $1 trillion, has surpassed credit card debt. These burdens will limit students' ability to contribute to our consumer economy for years to come. Worse, unlike an underwater mortgage, Congress has made it illegal for people to walk away from student loans they can't pay. The debt will follow them the rest of their lives.

"This is basically a parasitic industry that is preying upon not just some of the most vulnerable members of our society, but the best of these most vulnerable members, people who listen to the rhetoric we feed them and who are actually attempting to better themselves," Nassirian says. "This is an industry that takes people's hopes and dreams and cashes them out."

And these people won't stop until they've emptied the till.

Marcuse interview on the Frankfurt School

This really nicely encapsulates a lot of the work, and themes we've discussed.

(The one below is where he insists that Marx has not been disproven)

on Marcuse "One-Dimensional Man"

I disagree with Marcuse's fundamental 'questioning' of alienation. "We are again confronted with one of the most vexing aspects of advanced industrial civilization: the rational character of its irrationality. Its productivity and efficiency, its capacity to increase and spread comforts, to turn waste into need, and destruction into construction, the extent to which this civilization transforms the object world into an extension of man's mind and body makes the very notion of alienation questionable. The people recognize themselves in their commodities; they find their soul in their automobile, hi-fi set, split-level home, kitchen equipment. The very mechanism which ties the individual to his society has changed, and social control is anchored in the new needs which it has produced" (9). If anything I think it is the delusion that one's "soul" can be found in cars, tvs, homes and appliances. I think the point is that we are fooling ourselves if we really think we can find happiness and acquire our needs with these things; non-essential needs such as those he mentions can never be met, there will always be more waiting behind them.

Later on he speaks about his earlier (above) argument, saying it "is not illusion but reality. However, the reality constitutes a more progressive stage of alienation. The latter has become entirely objective; the subject which is alienated is swallowed up by its alienated existence" (11).  Here I can get on board with what he is saying because while I agree that this type of need production and attempted fulfillment is just a more complex form of alienation, it is still certainly alienation. And while the mechanics of it may now be different, it seems that the state is very much the same (and alive) today. Do you agree with Marcuse that alienation is not an apparent, obvious truth? Do you think alienated peoples becomes so "swallowed up" in their lives that they don't even see how they have been and are further being alienated?

bit from 1956, Adorno and Horkheimer conversation, "Towards a New Manifesto"

Just this last year, notes from a conversation between Adorno and Horkheimer on trying to rewrite the Communist Manifesto in 1956 were published.
http://www.amazon.com/Towards-New-Manifesto-Theodor-Adorno/dp/1844678199/ref=sr_1_1?ie=UTF8&qid=1344119108&sr=8-1&keywords=toward+a+new+manifesto

They are great and funny and fascinating and fragmentary. I thought the following bit highly relevant to the discussion we had on Thursday:

Horkheimer: People like advertisements. They do what the ads tell
them and they know that they are doing so. American magazines
and comics.
Adorno: If I had said to my father that mass culture is untrue, he
would have answered: but I enjoy it. Renunciation of utopia means
somehow or other deciding in favour of a thing even though I know
perfectly well that it is a swindle. That is the root of the trouble.
Horkheimer: Because the strength you need to do the right thing is
kept on a leash. If we formulate the issues just as we speak, it all
sounds too argumentative. People might say that our views are just
all talk, our own perceptions. To whom shall we say these things?
Adorno: We are not proposing any particular course of action. What
we want is for people who read what we write to feel the scales
falling from their eyes.
Horkheimer: People will say, well, this is just philosophers talking.
Or else, you have to be like Heidegger and speak like an oracle. We
have to solve the problem of theory and practice through our style.
We have to make sure that people don’t just say, ‘My God, the things
they say make everything sound very bad, but they don’t really mean
it like that, even when they shout and curse.’ This is all connected
with the fact that a party no longer exists.